Minnesota has joined Colorado in implementing a retail delivery fee. Unfortunately for retailers, Minnesota has made a surprisingly complicated tax even more complex. The fee is effective July 1, 2024, giving sellers a little over a year to sort through the issues created by this fee.
Minnesota’s delivery fee is $0.50 on each transaction that exceeds $100 involving the delivery of tangible personal property subject to sales and use tax and clothing (excluding cloth and disposable child and adult diapers). “Transaction” isn’t defined in the statute, but it is likely one sale or invoice. Items exempt from the fee do not count towards the $100 threshold. The fee is not imposed on transactions picked up at the retailer’s place of business, including curbside delivery orders. Also, because the fee is imposed per transaction, a transaction that involves multiple deliveries is only subject to one delivery fee. The fee is nonrefundable unless the purchaser, retailer, or delivery provider cancels the delivery.
The legislation exempts certain types of deliveries from the fee. The fee does not apply if the purchaser is not subject to the sales and use tax. Note that exempt sales to otherwise taxable purchasers are subject to the fee (e.g., a sale of manufacturing equipment to a manufacturer is subject to the fee because the manufacturer is generally subject to the sales and use tax). Deliveries made using vehicles that require a permit or road authority are not subject to the fee. Also exempt are deliveries of food, food ingredients, prepared food, drugs, medical devices, accessories and supplies, and baby products. Finally, deliveries of all items sold by a food and beverage service establishment, including deliveries made by third parties on their behalf (e.g., Uber Eats), are not subject to the fee.
Small businesses are not required to collect the retail delivery fee. Businesses with less than $1,000,000 of retail sales in the previous calendar year are small businesses and exempted from this fee. Read literally, a business that has $100 million of total revenue, of which $99.5 million are wholesale sales supported by valid resale certificates, would not be subject to this fee because its retail sales are only $500,000. Additionally, a marketplace provider is not required to collect the fee when facilitating the sale of a retailer that made retail sales totaling less than $100,000 in the previous calendar year through the marketplace provider. Retailers and marketplace providers must begin paying the delivery fee on the first day of a calendar month occurring no later than 60 days after exceeding the specified thresholds. For example, if a retailer exceeds the $1,000,000 threshold on July 15, the retailer must begin remitting the tax by September 1.
The fee will be reported on a form prescribed by the commissioner. It will be due and paid on the same cycle as sales and use tax returns.